Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1000.
- Add a stop-loss at 1.1150.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1085 and a take-profit at 1.1165.
- Add a stop-loss at 1.1000.
The EUR/USD pair pulled back for the third consecutive day after the strong US jobs report, weak manufacturing data, and rising geopolitical risks. It retreated to a low of 1.1070 on Wednesday morning, down from last week’s high of 1.1215.
Risk-off sentiment resumes
The EUR/USD exchange rate retreated as the US dollar index rose by over 0.40% as geopolitical risks rose. Israel launched a ground attack in Lebanon on Tuesday morning while Iran launched hundreds of rockets to Israel.
There is a risk of a full-blown war in the Middle East, which will have a major impact globally because of oil prices. Higher oil prices could lead to inflation, which will push central banks to slow their interest rate cuts.
The pair also fell after Europe published encouraging inflation numbers on Tuesday. A report by Eurostat showed that the headline Consumer Price Index (CPI) fell from 2.2% in August to 1.8% in September, lower than the ECB’s target of 2.0%.
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The report means that the European Central Bank (ECB) may decide to cut interest rates again later this month because the bloc is slowing. Industrial production in most countries has slowed, with giant companies like Volkswagen and Stellantis warning about their business.
The EUR/USD pair also retreated after the weak US manufacturing data. According to S&P Global and the Institute of Supply Management (ISM), the country’s manufacturing PMI dropped to 47.3 and 47.2, signaling that the industry was still contracting.
The only positive report was from the Bureau of Labor Statistics (BLS) showed that the number of job openings rose from over 7.7 million in July to 8.04 million in August.
The next data to watch will be the ADP jobs report, which will provide more color about the state of the labor market.
EUR/USD technical analysis
The EUR/USD pair pulled back to a low of 1.1043, its lowest point since September 12. On the daily chart, it has formed a double-top chart pattern at 1.1215 and a neckline at 1.1000. It has moved slightly below the middle line of the Bollinger Bands while the Percentage Price Oscillator have formed a bearish crossover.
The pair has also dropped below the crucial support at 1.1140, its highest swing in December 2023. Therefore, the path of the least resistance is downwards, with the next point to watch being the double-top’s neckline at 1.1000.
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